Local law firms court startups with discounted service, write offs

After nearly two decades of helping entrepreneurs get on their feet, Kanata lawyer Debbie Weinstein has learned the brutal truth: when it comes to legal services, most new businesses would rather be spending their hard-earned capital on something – anything – else.

Paul Fortin, left, is regional director of business development and Curtis Behmann is a partner at Borden Ladner Gervais.

“A lot of these startups just have no money to pay legal fees,” says the co-founding partner of LaBarge Weinstein, which caters to just such enterprises. “And any money they do have really has to go into more important things, quite frankly.”

That’s just fine by Ms. Weinstein. If a new firm doesn’t have the cash to cover its fees, her firm will defer payments until it does. If a startup goes under before it can pay, it’s no big deal: LaBarge Weinstein writes it off. It’s as simple as that.

“It’s not lucrative to serve startups,” she says. “But what it is, it’s creating an inventory of clients, some of which are going to pop out and succeed.”

Her firm, which has a high-profile client list that includes Shopify and Halogen, writes off tens of thousands of dollars in legal fees every year, she adds.

“But that’s OK, because those guys may actually go to start another (company). We don’t see anything wrong with failure. When you have a client that you’ve helped for up to a year or more with no fees, and they turn out to be successful, they’re a client for life. That’s what we’ve built.”

LaBarge Weinstein is just one of many Ottawa law firms vying for a piece of the startup pie. With venture capital financing showing signs of a rebound after more than a few lean years, other firms are stepping up efforts to lend a hand to budding entrepreneurs.

Last month, Borden Ladner Gervais launched its Catalyst Program in conjunction with Invest Ottawa. Under the program, which is open to companies that have landed government funding through avenues such as the federal Industrial Research Assistance Program, BLG will match every dollar those startups spend on legal services, up to a maximum of $10,000.

“The idea was really to be able to reward companies who have obtained government funding and have gone through some type of vetting process already and say, ‘You know what? You guys have been successful in getting that. You’ve shown some success,’” says Curtis Behmann, a partner and patent agent at BLG’s Ottawa office. “We want to be able to acknowledge that.”

The pay-when-you-can model can sometimes leave young companies feeling beholden to certain law firms, he says, whereas the Catalyst Program has no strings attached.

“It’s a very transparent process,” he says. “It’s clear that it’s a win-win situation for everyone. They get additional services that they don’t have to pay extra for and we get to work with companies that have a lot of promise. Hopefully, those companies would be successful and we would be able to be a part of their success.”

The program, which has no set cap, has already attracted interest from both inside and outside of Ontario.

“The quality of the companies … is pretty strong,” says Paul Fortin, BLG’s regional director of business development. “It’s a very competitive market for legal services in Ottawa and Canada. Ottawa is a hotbed of technology and we are very keen to invest in helping grow that.”

Other firms, however, say the idea of helping startups is nothing new in the legal profession.

“It’s really just marketing,” McMillan partner Elisabeth Preston says of the Catalyst Program. “Everybody does it. Law firms are all having to adapt to a changing environment and changing economy. You’re always being innovative.”

Ms. Preston has worked with “scores” of startups over the years, she says, often without even keeping track of billable hours until they’ve found their footing. She doesn’t consider it an especially risky approach to doing business.

“That’s just an investment that we make,” she says. “I wouldn’t want to have only that kind of a client. As a lawyer, I need to have a mix. But I certainly wouldn’t want to have only blue-chip clients, because a lot of the most interesting work is working with a startup.”